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Notification
GST Applicability on Renting of Motor Vehicles (Rent a cab) as amended by Various Notifications from time to time i.e Exemptions, Reverse Charge and amendments thereoff
April 13, 2020
ALL ABOUT RENTING OF MOTOR VEHICLES
As per Notification No 11/2017 central tax rate dated 28th June 2017
There can be 2 SAC code for renting of motor vehicles:-
(a) SAC 9964 Passenger Transport Services (Point No 6)
(b) SAC 9966 Rental Service of Transport Vehicles
SAC 9964 by its name represent shared services of transport i.e. he might provide services to 2 more persons with you, whereas SAC 9966 is more concerned to Renting of Motor cab as it represents by its name Rental service of Transport.
Although tax rates on both SAC Code are same and similar amendments has been made each time by the government.
Moving Forward in this article We will be discussing Heading 9966 in detail:-
As per Notification No 11/2017 Central Tax Rate (Point No 10)
Heading 9966 Rental Service of Transport Vehicles:-
| Service Description | CGST Rate | Conditions |
(i) Renting of Motor cab where the cost of fuel is included in the consideration charged from the service recipient
| 2.50%
| No Input Tax Credit of Goods or services will be allowed (Also read Explanation (iv) ) |
| (ii) Rental Services of Transport Vehicles with or without operators other than (i) above | 9% | No Conditions i.e Complete Input Tax Credit Allowed |
Explanation (iv) of Said Notification
(iv) Wherever a rate has been prescribed in this notification subject to the condition that credit of input tax charged on goods or services used in supplying the service has not been taken, it shall mean that,-
(a) credit of input tax charged on goods or services used exclusively in supplying such service has not been taken; and
(b) credit of input tax charged on goods or services used partly for supplying such service and partly for effecting other supplies eligible for input tax credits, is reversed as if supply of such service is an exempt supply and attracts provisions of sub-section (2) of section 17 of the Central Goods and Services Tax Act, 2017 and the rules made thereunder.
Therefore if Cost of fuel is included in the fare charged by the transporter, then transporter can charge 2.5% CGST (Total GST of 5%) and can not take any GST Input.
But if Transporter wants to take GST input then he needs to discharge GST @18%. In second condition there is no where mentioned that cost of fuel should be included or not i.e. Peoples can make use of loop hole of law and can make excluding fuel invoice.
To Counter that Amendment has been made
Notification No 20/2017 Central Tax Rate dated 22nd August 2017
has amended the original Notification No 11/2017 Central Tax Rate and has made following changes,
(Changes made have been highlighted in green)
Heading 9966 Rental Service of Transport Vehicles:-
| Service Description | CGST Rate | Conditions |
(i) Renting of Motor cab where the cost of fuel is included in the consideration charged from the service recipient
| 2.50%
| No Input Tax Credit of Goods or services will be allowed (Also read Explanation (iv) ) |
(i) Renting of Motor cab where the cost of fuel is included in the consideration charged from the service recipient
| 6%
| No Conditions i.e Complete Input Tax Credit is Allowed
|
Please be noted that both points have been clubbed into Point No (i) now,
we are showing separately just to make it easy to understand
Therefore wef 22nd August 2017 input tax credit will be allowed only when Renting of motor vehicle also includes fuel cost.
No change in Explanation(iv) has been made
Now govt has forgotten to provide a case where renting of motor vehicle service doesnt include cost of fuel in the consideration, i,.e case when fuel cost is beared by service receiver.
Notification No 31/2017 Central Tax Rate
A further amendment has been made vide Notification No 31/2017 Central Tax Rate
(Changes made have been highlighted in green)
Heading 9966 Rental Service of Transport Vehicles:-
| Service Description | CGST Rate | Conditions |
(i) Renting of any Motor Vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient
| 2.50%
|
No Input Tax Credit of Goods or services will be allowed, Credit of Input service of same line of business allowed (Also read Explanation (iv)) |
(i) Renting of any Motor Vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient | 6%
| No Conditions i.e Complete Input Tax Credit is Allowed
|
Therefore vide Notification No 31/2017 Central Tax Rate Govt has allowed credit to Vehicle Operator to the extent input belongs to input services procured from another service provider of transporting passengers in a motor vehicle or renting of a motor vehicle, i.e. same line of business will be allowed.
But we are unable to trace any amendment in Explanation (iv) which was required to give complete effect to this notification,
In the absence of any update from the department we are moving ahead hoping that it will be considered deemed amended.
Notification No 01/2018 Central Tax Rate dated 25th Jan 2018
A further amendment has been made vide Notification No 01/2018 Central Tax Rate dated 25th Jan 2018
(Changes made have been highlighted in green)
Heading 9966 Rental Service of Transport Vehicles:-
| Service Description | CGST Rate | Conditions |
| (i) Renting of any Motor Vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient | 2.50% | No Input Tax Credit of Goods or services will be allowed. Credit of Input service of same line of business allowed (Also read Explanation (iv)) |
| (i) Renting of any Motor Vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient | 6% | No Conditions i.e Input Tax Credit Allowed |
(ii) Time Charter of vessels for Transport of Goods | 2.50% | Only Credit of Ships, Vessels Including Bulk Carriers and Tankers allowed (Rest No Credit Allowed) Explanataion (iv) applicable |
| (iii) Rental Services of Transport Vehicles with or without operators other than (i) (ii) above | 9% | No Conditions i.e. Complete Input Tax Credit Allowed |
So now government has made amendment and has covered the service of renting of motor vehicles without fuel, i.e fuel cost will be beared by the service receiver in point no (iv)
Notification No 20/2019 Central Tax Rate dated 30th Sep 2019
A further amendment has been made vide Notification No 20/2019 Central Tax Rate dated 30th Sep 2019
(Changes made have been highlighted in green)
Heading 9966 Rental Service of Transport Vehicles with Operators
| Service Description | CGST Rate | Conditions |
| (i) Renting of any Motor Vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient | 2.50% | No Input Tax Credit of Goods or services will be allowed. Credit of Input service of same line of business allowed (Also read Explanation (iv)) |
| (i) Renting of any Motor Vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient | 6% | No Conditions i.e Input Tax Credit Allowed |
| (ii) Time Charter of vessels for Transport of Goods | 2.50% | Only Credit of Ships, Vessels Including Bulk Carriers and Tankers allowed (Rest No Credit Allowed) Explanataion (iv) applicable |
| (iii) Rental Services of Transport Vehicles with or without operators other than (i) (ii) above | 9% | No Conditions i.e. Complete Input Tax Credit Allowed |
So wef 30th Sep 2019, This heading will cover renting of motor vehicles with operator only.
REVERSE CHARGE STARTED FROM 30th SEP 2019
Notification No 22/2019 Central Tax Rate has provided with Reverse Charge on renting of motor vehicle
On the same date government has also issued a Notification No 22/2019 Central Tax Rate dated 30th Sep 2019 which has provided for a reverse charge on renting of motor vehicles in the following manner:-
| Category of Service | Supplier of Service | Receiver of Service |
| Services provided by way of renting of a motor vehicle provided to a body corporate | Any person other than a body corporate, paying central tax at the rate of 2.5% on renting of motor vehicles with input tax credit only of input service in the same line of business | Any body corporate located in the taxable territory
|
There is lacuna in this reverse charge entry because it doesn’t provide whether renting of motor vehicles is for passengers or for goods.
Even if We go with the intention of law then also case (i)(a) has been taken under reverse charge and other cases has not been taken under reverse charge i.e.(i)(b) and (iii) has not been taken into reverse charge.
Notification No 29/2019 Central Tax Rate dated 31st Dec 2019
Therefore a further amendment has been made by Notification No 29/2019 which has clarified the entire reverse charge applicability on renting of motor vehicles.
It has substituted the previous entry like this
| Category of Service | Supplier of Service | Receiver of Service |
| Services provided by way of renting of a motor vehicle provided to a body corporate | Any person other than a body corporate, paying central tax at the rate of 2.5% on renting of motor vehicles with input tax credit only of input service in the same line of business | Any body corporate located in the taxable territory |
| Services provided by way of renting of any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient, provided to a body corporate. | Any person, other than a body corporate who supplies the service to a body corporate and does not issue an invoice charging central tax at the rate of 6 per cent to the service recipient | Any body corporate located in the taxable territory |
(Amendment part has been highlighted in green)
| Service Provider is providing renting of motor vehicles | Service Receiver | Charges GST at rate of | Which Charge will apply |
| Any Person who issue invoice where cost of fuel is included | Body Corporate | 5% | Reverse Charge will apply and provider of service will issue a invoice with no GST |
| Any Person who issue invoice where cost of fuel is included | Body Corporate | 12% | Forward Charge |
| Any Person who issue invoice where cost of fuel is included | Any person other than Body Corporate | 5% | Forward Charge |
| Any Person who issue invoice where cost of fuel is included | Any person other than Body Corporate | 12% | Forward Charge |
| Service Provider is providing renting of motor vehicles | Service Receiver | Charges GST at rate of | Which Charge will apply |
| Any Person who issue invoice where cost of fuel is not included | Body Corporate | 18% | Forward Charge will prevail |
| Any Person who issue invoice where cost of fuel is not included | Any person other than Body Corporate | 18% | Forward Charge will prevail |
Therefore after considering these points we have come to a conclusion that reverse charge is applicable only on a limited case of renting of motor vehicles designed to carry passengers.
Thanks
CA Rahul Gupta
